FY10 Tax Rate and Budget Public Hearing

In compliance with and pursuant to Section 6-308 of the Tax Property Article of the Annotated Code of Maryland, the County Commissioners held a public hearing on Tuesday, June 9, 2009, at 6:00 p.m. in the County Commissioners’ Hearing Room, County Government Center, 400 High Street, Chestertown, Maryland, on the proposed Fiscal Year Budget beginning July 1, 2009 to increase property tax revenues by 7.0% above the Constant Yield Tax Rate. The Constant Yield Tax Rate has been established by the Maryland Department of Assessments and Taxation at $.908 for Fiscal Year 2010.

The proposed tax rate intended to be levied by the County Commissioners of Kent County for FY10 is as follows: $.972 per One Hundred Dollars of real property subject to taxation for county purposes.

Notice of public hearing was read into the record by Commissioner Crow as well as procedures for testimony at the public hearing.

Commissioner Crow commented that the budget process began in March and that the Board was aware that it would be a tough process due to stressed economic times. It is the Board’s feeling that next year’s budget process may be even tougher.

A power point presentation was then given by Ms. Merritt.

Ms. Merritt reviewed budget challenges that will be faced by the County for FY10, including:

County Roads- The County will have to contribute $1,101,000 to its Roads Fund as a result of a 46% decrease in roads dollars from the state. As a result, the County Roads budget was reduced by 10%, surface treatments projects were reduced from thirty to seven miles and there are two vacancies in the Roads Department that will not be filled.

Recordation and Property Tax- Additionally, recordation and property transfer tax revenues are down $1,100,000 due to the slowing housing market.

Income Tax- There is no increase in income tax revenue expected in FY10 based on the current economic conditions.

Retiree Health Insurance- Retirees health insurance contributions total $626,000 ($156,000 for County employees and $470,000 for Board of Education employees), based on the new reporting standards issued by the Governmental Accounting Standards Board. Ms. Merritt noted that failure to fund the calculated annual contribution at an appropriate level could adversely impact the County’s financial statement, bond rating, and ability to borrow money at the most competitive rates.

Ms. Merritt then reviewed the following County budget priorities and informed that recognizing the current economic climate, the budget focuses on continuing to provide essential services to citizens at reasonable costs.

Property and Income Taxes- Property and income tax rates will remain at the FY09 levels.

Water and Wastewater Services- The County will fund approximately $791,000 or 28% of the water and wastewater operating costs, to keep water and sewer rates at a more affordable level for citizens.

Homeowner’s Property Tax Credit- The County will also continue to offer the County Homeowner’s Property Tax Credit to property owners who are over 60 years of age and have household incomes of up to $25,000. This year, 223 credits were issued for a total of approximately $90,000.

Community Center- The Community Center campus will consist of an indoor facility, outdoor swimming pool, several sports fields and connecting roads and trails to the High School, Worton Elementary School and Worton Park. The indoor facility will be approximately 21,000 square feet and contain a dividable gymnasium, offices, a multi-purpose meeting/activity room and a computer room. The facility will provide office space for the Parks and Recreation Department, gymnasium space to the surrounding schools and provide youth, adult and family activities, after school programming and community meeting rooms. The Community Center is expected to open in early 2010.

Ms. Merritt then turned to the subject of revenues.

Property taxes are the County’s largest revenue source and are budgeted at $28,159,000 or 62% of the County’s total revenue. The fiscal year 2010 property tax rate will remain at $.972 per $100 of assessable property value. Property taxes are increasing 11% over last year’s budget as a result of higher assessments and reduction in credits.

Income taxes are the second largest revenue source and are budgeted at $12,400,000 or 28% of the total revenue. The income tax rate will remain at 2.85% of taxable income. The income tax levels remain the same as the FY09 level based on the State’s revenue forecast for the coming year and the slowing economy.

Other local taxes account for $1,727,000 or 4% of the total budget and include the following taxes: admission and amusement, hotel, property transfer, recordation and documentation, and 911. Other local taxes are decreasing $1,100,000 or 39% from last year’s budget, which is primarily attributable to a decrease in recordation and documentation revenue and property tax transfer revenue reflecting the slowing housing market.

Grant revenue contributes $967,000 or 2% to total revenue and reflects monies received from federal, state, and local governmental agencies. Grant revenues are decreasing $715,000 or 43% over last year’s budget, which is primarily attributable to homeland security and 911 trust fund grants that were significant in FY09 but are unknown at this time for FY10.

Other County revenues include service charges, licenses and permits, interest income, rental income, fines and forfeitures, sale of fixed assets, and transfers from other funds. This category is budgeted at $1,049,000 or 2% of total revenues. Other revenues are decreasing $209,000 or 17% from last year’s budget, which is primarily due to decreases in interest income and service charges.

Ms. Merritt outlined County expenditures as follows:

Public School funding accounts for 41% of the total budget, $18,976,000. Public School funding will increase 1% over last year’s budget as follows:

Personnel costs total $12,505,000 and account for 28% of the total budget. This category includes salaries, benefits, and payroll taxes. Personnel costs include the following:

- Benefits are increasing $382,000, which includes increases in health insurance and retirement costs.
- Salaries are increasing $36,000. County employees will not receive a cost of living increase in FY10. Performance increases (based on evaluations) and merit increases (based on the completion of predetermined goals) averaged 1.2%. There are 4.5 positions that are currently vacant and that will not be filled.

Commissioner Fithian commented that health insurance for county employees is double the amount that it was five years ago with increased deductibles.

Operating expenditures represent 11% of the budget and total $4,783,000. All goods and services purchased by the County (excluding capital expenditures) are reflected in this category. Items in this classification include property services, contracted services, and supplies.

Agency allocations are $3,820,000 or 8% of the total budget and reflect funding to organizations and programs that are not a direct part of county government, but provide services to the citizens of Kent County. The most significant increases will occur in the following areas:

- $72,000 – The Volunteer Fire Companies will receive the mandated funding tied to the increase in the assessable base. This is an 8.5% increase over FY09.
- $21,000 – Municipalities will receive additional funding based on the assessable base formula.
- ($71,000) – Chesapeake College will receive fewer dollars based on the funding formula tied to enrollment.

Debt service on county projects totals $1,726,000 or 4% of the total budget and includes principal and interest payments on short term and long term debt. Debt service for county projects will increase by 69% from last year’s budget, which is mostly attributable to new debt service for the Community Center.

Fund transfers total $2,083,000 or 5% of the total budget and include transfers from the general fund to other funds. Fund transfers will increase by 75% over last year’s budget, primarily due to the following:

- $1,025,000- Increase in the transfer to the Roads Fund because of State cuts to the County’s gasoline tax revenue.
- $ 103,000- Increase in the transfer to the Water and Wastewater services fund. The County will subsidize 28% of the operational costs to keep the user fee increase to 2%.

Capital Expenditures total $518,000 or 1% of the budget.

Commissioner Crow commented that faces have to be placed on the budget numbers and the Commissioners are attempting to be as fair across the board as they possibly can.

Commissioner Crow invited persons who signed in to now testify.

Mark Mench, representing the Maryland State Teacher’s Association, commended the school system and support staff for working together to help students in danger of not graduating receive diplomas. Mr. Mench informed that as a result of a shortage of $2Million in the Board of Education budget, four to five staff members may lose jobs, including in-school suspension staff and special education staff. He requested that the Commissioners make attempts to fund these positions if possible, which he stated would cost approximately $175,000.

Commissioner Fithian stated that the Kent County school system is being short-changed in State School Construction Funding and other funding as compared to other counties. He gave an example that Caroline County has 5400 students as compared to Kent County’s 2050 students; however, Kent County received $9,457,000 in State Aid as compared to the $42Million received by Caroline County when they only have 2.5 times the student population of Kent County. Kent County’s tax payers are also paying four times the amount that Caroline County

tax payers are paying. He reminded that the Commissioners invited the District 36 legislators to meet and discuss this disparity in funding and no one from the school system attended the meeting. Commissioner Fithian stated that the school system is being funded well over the required maintenance of effort amount and to say that the Commissioners are anti-education would be false. The Commissioners are funding four times as much of the County’s tax money for education as Caroline County and are being tremendously shorted in State assistance. He suggested that members of the school administration who wish to make the case for additional funding should contact the District 36 legislators.

Ed Birkmire, Executive Director, Humane Society, expressed appreciation to the Commissioners for level funding the Humane Society when funding could have been decreased. He stated that the Humane Society budget request was for a 10% increase to assist with animal medical and food costs. He commented that thanks to the Commissioners’ funding assistance, no animals have been euthanized since he began as Executive Director. As of April, the Humane Society has spent $10,000 over what was originally budgeted due to medical costs. The Humane Society has been fortunate enough to receive donations thanks to food drives sponsored by Kent School and financial donations received from tea party attendees.

Dr. Barbara Wheeler, Superintendent of Schools, reiterated that the school system was forced to reduce $2Million from their proposed budget. She expressed appreciation for the Commissioners support of the school system and funds provided to the support the capital program and allowing for the STEM Initiative. In response to question raised by Commissioner Crow, Dr. Wheeler informed that Scenario 3 of the Board of Education budget provides a 1% increase for all staff (plus an approximate 1.4% increment) while also forcing the termination of four to five employees. In addition, Scenario 3 forces the America’s Choice Program and In-School Suspension programs to be eliminated.

Commissioner Pickrum stated that the Kent County School system is the smallest in the State with a lot of excess capacity to be paid for and a declining school enrollment; however, it still has one of the best staffed systems. He commented that he would not like to see any positions eliminated if those positions are necessary for the maintenance of quality education. He added that the continually improving progress of the school system needs to continue as best possible and he supports maintaining the positions if possible.

Roy Whiteley, representing his family and “Marylanders For Fair Property Taxation”, expressed concerns related to increasing property tax assessments and property taxes. He requested that the Commissioners provide relief to the homeowners by reducing the property tax rate to the constant yield tax rate.

Bob Kramer made comments relating to the Water and Wastewater Enterprise Fund and the 2% increase in the operating fee.

Commissioner Crow stated that because of the environmental aspects of having sewer and water benefit everyone, the goal of the universal rate was 15%. The Commissioners also set a goal that rates would not increase to more than 4%. Until this year and as a result of the current economic times, the rate will increased by 2%, which will come from the Enterprise Fund. There

are not enough users in the county systems to keep numbers and costs as low as municipalities such as Chestertown.

Commissioner Fithian added that there are areas of properties (such as the Chesterville Forest Area) in the county where septic systems do not work properly. The ability to take the failed septic systems out of the environment and help to clean up the bay costs money and having county residents help pay for the projects will also benefit from the clean-up of the bay.

Commissioner Pickrum commented that there were more properties in the tax sale this year than he can remember as a result of inabilities to pay water and sewer bills. Based on the amount of properties in the tax sale, the Commissioners opted to give a 2% increase in the rate rather than a 4% increase in rates. Commissioner Fithian stated that normally there are approximately 70 properties in the tax sales; however, this year there were approximately 270.

Cindy Genther, Executive Director, Chamber of Commerce, informed that in the past year, ten businesses have been lost and that all of the businesses in the County are struggling. Most of the county’s large employers have had hiring freezes, layoffs, and few to none are giving pay raises to employees. She stated that the business community is encouraging the county and the school system to use fiscal restraints, including streamlining operations.

Nancy Fernwalt, Chairman, Commission on Aging, and Meals on Wheels Driver, informed that in 2008 over 12,000 meals were delivered to homebound residents in Kent County and approximately 4500 meals were served at the Amy Lynn Ferris Adult Activity Center. Staff at the Amy Lynn Ferris Adult Activity Center responded to 8,400 inquiries for information and assistance for services available for seniors in 2008. Ms. Fernwalt expressed concern that the allocation amount being provided by the County is not keeping up with the demands of the Upper Shore Aging. She stated that without adequate funds, the quality of life for seniors will diminish. She expressed appreciation for the Homeowner’s Property Tax Credit and requested that the Commissioners be mindful of the needs of seniors.

Joanne Garber, Special Education Teacher, Kent County Public Schools, stated that she is considering taking on the State to determine why the Kent County school system is being short changed in regards to State aid. Ms. Garber explained the importance of the positions that could possibly be lost in the school system as result of the budget cuts and urged the Commissioners to look into the costs to keep the positions in the schools.

In response to question raised by Commissioner Pickrum, Ms. Miller confirmed that there are five positions that will be lost as a result of the budget cuts.

Beatrice Newell, Secretary, Humane Society Board of Directors, requested that the Commissioners take into consideration the effects of diminished Humane Society funds, which are needed to fund support staff in order for them to protect humans from potential injury by animals.

David Newell, President, Humane Society, Board of Directors, expressed appreciation to the Commissioners for their generosity over the years. Mr. Newell stated that during hard economic times, people tend to take it out on animals. He stated that in the same way that
children are taken care of, animals need to be taken care of. He requested that the Commissioners provide additional funds for the Humane Society if possible.

Judge John Nunn expressed appreciation for assistance provided from the Commissioners for the smaller increase in Water and Wastewater operating fees. He stated that the Community Center being built will be a multi use facility that all of the residents of Kent County can utilize and be proud of. Judge Nunn thanked the Commissioners for their leadership on this project.

Commissioner Pickrum commented that the building of a Community Center has been a ten year effort. He expressed appreciation to the Board of Education for their partnership on this project. Commissioner Fithian commented that the Parks and Recreation Facility can no longer be properly used and the new community center is an investment in the residents of Kent County. Commissioner Fithian cited a statistic in a survey completed by the Local Management Board of Salisbury which stated that Kent County has the highest amount of children being raised by adults other than their parents. He hopes that the Community Center will act in a way to bring families together. He also commented that he has spoken with young boys in the Rock Hall area who feel that the Boys Club acted as a saving grace as well as a second home. Commissioner Fithian hopes that the Community Center will act in that same manner for others.

Charles “Chip” MacLeod, Chairman, Community Center Authority, stated that the Community Center will improve the quality of life for Kent County and give opportunities for agencies to partner together. He expressed appreciation to the Commissioners for their commitment and for taking on such a momentous project.

Bill Crowding of Worton stated that the proposed salary increase for the school system is well deserved. In response to Commissioner Fithian’s comment relating to children being raised by people other than their parents, Mr. Crowding stated that children are also being raised by the schools.

Dr. Michael Harvey, President, Board of Education, commented that to set things on a fair basis it is his understanding that some county employees, based on performance and merit, will fair roughly in the same ball park as what is proposed for school system staff. He also expressed appreciation for all that the Commissioners do for the school system.

Mary Lee Heinefield of Rock Hall expressed concerns relating to difficulties for those living on a fixed income and how hard it is to pay increasing property taxes.

Commissioner Pickrum commented that the Commissioners anticipated expanding the Homeowner’s Property Tax program; however, the current economic times would not allow for an increase. He also informed that the Board intentionally provided funding in the Local Emergency Assistance Program administered by the Department of Social Services funding to assist those who cannot meet expenses for heating, electricity, etc. He added that the Commissioners do what they can to help those that are less fortunate.

In response to Mr. Crowding’s comment, Commissioner Fithian stated that he agrees that the school system does a great job; however, the Commissioners are blamed for shortfalls and not the state and this matter needs to be rectified.

It is proposed that the Commissioners will adopt the Fiscal Year 2010 Budget and Tax Levy on June 16, 2009 at 10:00 a.m.